IC Markets Europe Fundamental Forecast | 17 June 2025 | IC Markets

IC Markets Europe Fundamental Forecast | 17 June 2025

What happened in the Asia session?

As widely expected, the Bank of Japan (BoJ) maintained its key policy rate at 0.5% for the fifth successive board meeting, in line with market consensus, holding it steady at the highest level since 2008. The unanimous decision signalled a careful stance in light of ongoing uncertainty surrounding U.S. tariff policies, which may threaten global economic growth. After talks at the G7 Summit in Canada failed to produce a breakthrough, Tokyo and Washington agreed to continue their trade negotiations. At the same time, as part of its gradual move away from prolonged ultra-loose monetary policy, the Bank of Japan reiterated its intention to cut Japanese government bond (JGB) purchases by ¥400 billion each quarter through March 2026, followed by an additional ¥200 billion reduction per quarter starting in April 2026. With this gradual strategy, the BoJ’s monthly bond purchases are set to fall to ¥2 trillion by the first quarter of 2027, reflecting a cautious but steady approach to policy normalisation. The yen initially strengthened upon release of the monetary policy statement, causing USD/JPY to reverse from 144.80 to as low as 144.40 by midday in Asia. BoJ Governor Kazuo Ueda is expected to deliver his press conference after Asia’s lunch hours, which could inject higher volatility for the yen.

What does it mean for the Europe & US sessions?

Following a significant drop to -18.5 points in April, the Economic Sentiment Indicator for the Euro Area rebounded in May with a reading of 11.6 points, primarily due to the ongoing 90-day suspension of tariffs imposed by the U.S. on the European Union and other major trading partners. This rebound looks set to continue in June, with the forecast pointing to a reading of 34.8. Coupled with ongoing weakness in the U.S. dollar, the Euro will likely remain in its upward trajectory.

The Dollar Index (DXY)

Key news events today

Retail Sales (12:30 pm GMT)

What can we expect from DXY today?

Consumer spending is expected to register its second monthly decline in 2025. Retail sales have been mixed thus far, and after rising at a monthly rate of 1.7% and 0.1% in March and April, respectively, sales look set to fall 0.5% in May. Despite the ongoing 90-day suspension of tariffs on U.S. imports, consumers appear to be scaling back their spending patterns, a result that would certainly weigh on the greenback.

Central Bank Notes:

The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 7 May 2025.
The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run, but uncertainty around the economic outlook has increased further.
The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.
Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilised at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
GDP growth forecasts were revised downward for 2025 (1.7% vs. 2.1% in the December projection) while PCE inflation projections have been adjusted slightly higher for 2025, with core inflation expected to reach 2.5%, partly due to tariff-related pressures.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25B to $5B while maintaining the monthly redemption cap on agency debt and agency mortgage-backed securities at $35B.
The next meeting is scheduled for 17 to 18 June 2025.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

Retail Sales (12:30 pm GMT)

What can we expect from Gold today?

Next 24 Hours Bias

Weak Bullish

The Australian Dollar (AUD)

Key news events today

No major news events.

What can we expect from AUD today?

After rallying over 1.2% from Monday’s open, the Aussie fizzled out around 0.6550. This currency pair settled around 0.6520 as Asian markets came online, but the upward momentum remains robust.

Central Bank Notes:

The RBA reduced its cash rate by 25 basis points (bps), bringing it down to 3.85% on 20 May, following a pause on 1 April.
Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
Data on inflation for the March quarter provided further evidence that inflation continues to ease. At 2.9%, annual trimmed mean inflation was below 3% for the first time since 2021 and headline inflation, at 2.4%, remained within the target band of 2 to 3%.
While recent tariff announcements have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries, contributing to a weaker outlook for growth, employment and inflation in Australia.
Private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.
At the same time, a range of indicators suggests that labour market conditions remain tight. Employment is continuing to grow, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.
Looking through quarterly volatility, wage growth has softened over the past year or so but productivity growth has not picked up and growth in unit labour costs remains high.
There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments. While the central projection is for growth in household consumption to continue to increase as real incomes rise, recent data suggest that the pick-up will be a little slower than was expected three months ago.
There is a risk that any pick-up in consumption is even slower than this, resulting in continued subdued growth in aggregate demand and a sharper deterioration in the labour market than currently expected.
With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate, assessing that this move would make monetary policy somewhat less restrictive.
The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
The next meeting is on 8 July 2025.

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

After initially gapping lower at Monday’s open, the Kiwi rallied sharply as it hit an overnight high of 0.6087. This currency pair surged nearly 1.6% before settling around 0.6060, with strong tailwinds likely to remain intact on Tuesday.

Central Bank Notes:

The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 25 basis points bringing it down to 3.25% on 28 May, marking the sixth consecutive rate cut.
The Committee stated that annual consumer price index inflation increased to 2.5% in the first quarter of 2025 while inflation expectations across firms and households have also risen.
However, core inflation is declining and there is spare productive capacity in the economy; these conditions are consistent with inflation returning to the mid-point of the 1 to 3% target band over the medium term.
The New Zealand economy is recovering after a period of contraction as high commodity prices and lower interest rates are supporting overall economic activity but recent developments in the international economy are expected to reduce global economic growth.
Both tariffs and increased policy uncertainty overseas are expected to moderate New Zealand’s economic recovery and reduce medium-term inflation pressures. However, there remains considerable uncertainty around these judgements.
Labour market conditions remain weak while the unemployment rate is expected to peak this quarter at 5.2%.
Inflation is within the target band, and the Committee is well placed to respond to domestic and international developments to maintain price stability over the medium term.
The next meeting is on 9 July 2025.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

BoJ Interest Rate Decision (3:30 am GMT)

BoJ Press Conference (Tentative)

What can we expect from JPY today?

Central Bank Notes:

The Policy Board of the Bank of Japan decided on 17 June, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:
1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
2. The Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs. The scheduled amount of monthly long-term government bond purchases will, in principle, be reduced by about ¥400 billion each quarter from January to March 2026, and by about ¥200 billion each quarter from April to June 2026 onward, aiming for a level of around ¥2 trillion in January to March 2027.

Japan’s economy, while showing some weak movements in certain areas, is recovering moderately. Overseas economies, though partly exhibiting weakness due to the effects of various countries’ trade policies, are generally growing at a moderate pace. Exports and industrial production, while showing some last-minute demand due to the U.S. tariff increases, are basically moving sideways.
On the price front, looking at the year-on-year rate of change in consumer prices (excluding fresh food), the rate is currently in the mid-3% range, reflecting continued pass-through of wage increases to sales prices, as well as the effects of past rises in import prices and recent increases in food prices such as rice. Expected inflation rates are rising moderately.
As for consumer prices (excluding fresh food), the effects of past import price increases and recent rises in food prices such as rice, which have pushed up inflation so far, are expected to wane. During this period, the underlying rate of increase in consumer prices may stagnate somewhat due to the slowdown in growth pace.
Looking ahead, the Japanese economy is expected to slow its growth pace, as overseas economies decelerate due to the effects of various countries’ trade policies, putting downward pressure on Japanese corporate profits, etc., although accommodative financial conditions will provide some support. Thereafter, as overseas economies return to a moderate growth path, Japan’s growth rate is expected to increase.
As the growth rate rises, labour shortages intensify, and medium- to long-term expected inflation rates rise, inflation is expected to gradually increase. In the latter half of the projection period in the “Outlook Report,” inflation is expected to move at a level generally consistent with the “price stability target”.
There are various risk factors, but in particular, the outlook for the development of trade policies in various countries and the resulting uncertainty regarding overseas economic and price trends is extremely high. It is necessary to closely monitor the impact on financial and foreign exchange markets, as well as on Japan’s economy and prices.
The next meeting is scheduled for 31 July 2025.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

ZEW Economic Sentiment (9:00 am GMT)

What can we expect from EUR today?

Central Bank Notes:

The Governing Council reduced the three key ECB interest rates by 25 basis points on 5 June to mark the seventh successive rate cut.
Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.15%, 2.40% and 2.00% respectively.
Inflation is currently at around the Governing Council’s 2% medium-term target. In the baseline of the new Eurosystem staff projections, headline inflation is set to average 2.0% in 2025, 1.6% in 2026 and 2.0% in 2027. The downward revisions compared with the March projections, by 0.3 percentage points for both 2025 and 2026, mainly reflect lower assumptions for energy prices and a stronger euro. Staff expect inflation excluding energy and food to average 2.4% in 2025 and 1.9% in 2026 and 2027, broadly unchanged since March.
Staff see real GDP growth averaging 0.9% in 2025, 1.1% in 2026 and 1.3% in 2027. The unrevised growth projection for 2025 reflects a stronger-than-expected first quarter combined with weaker prospects for the remainder of the year. While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term.
Higher real incomes and a robust labour market will allow households to spend more. Together with more favourable financing conditions, this should make the economy more resilient to global shocks. Wage growth is still elevated but continues to moderate visibly, and profits are partially buffering its impact on inflation.
The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
The Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission, and it is not pre-committing to a particular rate path.
The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
The next meeting is on 24 July 2025.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Switzerland’s producer prices fell sharply in May, tumbling 0.5% MoM, as per Monday’s report. Not only did the latest print miss the forecast of a 0.1% increase, but it also marked the first decline in six months. The decrease was driven mainly by lower petroleum prices, with electricity, basic metals, and natural gas also getting cheaper. This unexpected ‘deflationary’ reading may have caused the Swiss franc to give up some of its recent gains as USD/CHF rose marginally on Monday. This currency pair was floating around 0.8150 as Asian markets came online on Tuesday.

Central Bank Notes:

The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.50% to 0.25% on 20 March 2025, marking the fifth consecutive reduction.
Underlying inflationary pressure has decreased further this quarter.
Inflation in the period since the last monetary policy assessment has again been lower than expected, decreasing from 0.7% in November to 0.3% in February, primarily due to lower electricity prices.
In the shorter term, the new conditional inflation forecast is slightly higher than December: 0.3% for Q2 2025, 0.4% for 2025 overall, and 0.8% for 2026 and 2027, based on the assumption that the SNB policy rate remains at 0.25% over the entire forecast horizon.
GDP growth in Switzerland remains moderate, with the services sector continuing to show slightly stronger growth, while manufacturing faces challenges.
The SNB anticipates GDP growth of around 1.0% to 1.5% for 2025.
The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
The next meeting is on 19 June 2025.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Cable continues to remain elevated due to the ongoing weakness in the greenback. This currency pair reached an overnight high of 1.3622 before settling around 1.3570 at the beginning of Tuesday’s Asia session.

Central Bank Notes:

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5 to 4 to reduce the Bank Rate by 25 basis points (bps), bringing it down to 4.25% on 8 May 2025.
Two members preferred a larger cut of 50 bps, while two opted to hold rates steady at 4.5%.
The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
Progress on disinflation in domestic price and wage pressures is generally continuing. Twelve-month CPI inflation fell to 2.6% in March from 2.8% in February, close to expectations in the February Report.
Although indicators of pay growth remain elevated, a significant slowing is still expected over the rest of the year.
Wholesale energy prices have fallen back since the February Report. Previous increases in energy prices are still likely to drive up CPI inflation from April onwards, to 3.5% for 2025 Q3, but is expected to fall back thereafter.
Underlying UK GDP growth is judged to have slowed since the middle of 2024 and has been much less volatile than growth in headline GDP – growth was expected to have been around zero in 2025 Q1, well below Bank staff’s projection for headline growth of 0.6%.
Underlying employment growth has also softened recently and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level – the impact of higher Employers’ National Insurance Contributions (NICs) on employment appears to have been fairly small to date.
Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
The next meeting is on 19 June 2025.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

No major news events.

What can we expect from CAD today?

With the U.S. dollar falling out of favour amongst investors and traders alike while oil prices rally strongly, demand for the Loonie remains robust as USD/CAD tumbled as low as 1.3539 on Monday. With no major domestic catalysts on Tuesday, the direction for this currency pair is likely to be dictated by the ongoing geopolitical tensions in the Middle East as well as the API report on U.S. inventory levels.

Central Bank Notes:

The Bank of Canada maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% on 4th June – marking the second consecutive meeting where rates were kept on hold.
The Governing Council noted that the ongoing increase and decrease of various U.S. tariffs, coupled with highly uncertain outcomes of bilateral trade negotiations and tariff rates remaining well above their levels at the beginning of 2025, placed downside risks on growth and lifted inflation expectations, warranting caution regarding the continuation of monetary easing.
The higher uncertainty stemmed from the absence of a clear tariff path by the U.S. and persistent threats of new trade actions, which prompted the BoC Governing Council to highlight risks such as the extent to which higher US tariffs reduce demand for Canadian exports.
Canada’s economic growth in the first quarter came in at 2.2%, slightly stronger than the original forecast, while the composition of GDP growth was largely as expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence.
Housing activity was down, driven by a sharp contraction in resales, while government spending also declined. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued.
The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9% while CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6%.
The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up, while recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs.
The Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs while proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy.
The Governing Council will focus on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval by supporting economic growth while ensuring that inflation remains well-controlled.
The next meeting is on 30 July 2025.

Next 24 Hours Bias

Medium Bearish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

After surging as high as $77.50 on Monday following Israel’s attack on Iran over the weekend, WTI oil futures pulled back sharply to settle around $71.80 per barrel. Oil prices initially rallied over 6% as the conflict intensified and U.S. President Donald Trump urged “everyone” to evacuate Tehran, increasing the prospect of escalating unrest in the region and potential disruptions to oil supply, particularly through the Strait of Hormuz. Iran is the third-largest producer among members of the Organization of the Petroleum Exporting Countries (OPEC), and the hostilities could cause major disruptions. Moving over to U.S. inventories, the API stockpiles have declined for three straight weeks, averaging a drawdown of 2.6 million barrels over this period. The uptick in demand for crude oil coincides with the peak summer driving season in the U.S., and for other countries in the Northern hemisphere. Continued drawdowns in storage levels would likely provide another tailwind for oil prices later today.

Next 24 Hours Bias

Weak Bullish

ICMarket

Recent

IC Markets Europe Fundamental Forecast | 17 June 2025

Live Spreads

Recommended for You

Tuesday 17th June 2025: Asia-Pacific Markets Slip Amid Israel-Iran Tensions

Tuesday 17th June 2025: Technical Outlook and Review

IC Markets Asia Fundamental Forecast | 17 June 2025

Latest

Ex-Dividend 18/6/2025

Tuesday 17th June 2025: Asia-Pacific Markets Slip Amid Israel-Iran Tensions

IC Markets Europe Fundamental Forecast | 17 June 2025

General Market Analysis – 17/06/25

Trade with a market leader you can rely on

ICMarket

IC Markets Europe Fundamental Forecast | 17 June 2025

Live Spreads

Newsletter

Recommended for You

Latest

Trade with a market leader you can rely on